Corporate taxes: what's a fair share?

Posted:
Tuesday, April 17, 2012 6:25 PM EDT

CEDAR RAPIDS (KWWL) -

A report from Citizens for Tax Justice finds that 26 of America's Fortune 500 companies pay no federal income tax. That's why on tax day, some union leaders in Cedar Rapids protested. But there's more to the numbers than meets the eye.

As people filed into the Cedar Rapids Post Office to mail off their taxes Tuesday, some were greeted by protesters. Local union members played the role of top corporate CEOs.

"Happy tax day! Thanks for paying your taxes so corporations and CEOs like me don't have to!" they shouted.

The union reps say their campaign is about educating the public. They believe companies should be taxed at a much higher rate.

"We know Wells Fargo paid four percent in their tax rate over the last three years. The average American is probably paying 28 to 30 percent in their tax rates. So we're just saying that this economy can't get going again if it's not a fair way of paying taxes, and we want corporations to pay their fair share to get our economy back on track," said Cathy Glasson with SEIU Local 199.

But what exactly is a fair share?

Kiplinger's Personal Finance has estimated that the top one percent of corporate earners represent 17 percent of all income, but pay some 37 percent of all taxes. So to even the ratio of what companies pay, everyday taxpayers would end up paying even more.

"If you start dividing that out and say, 'Ok. Let's pay our fair share.' Then those folks would see their taxes cut by more than half, and a lot of the folks in the bottom income earning areas would pay a lot more," said Dave Becker with Financial Resource Advisors.

And just because a company might not pay federal income tax, it doesn't mean they're paying no taxes, period.

"This tax code is several inches thick. And it's easy to pull one page out of there and say, 'Well nobody's paid taxes down this page.' But then there's 2,000 other pages that can apply to those folks," Becker said.

And the bottom line is if corporations were to pay more taxes, like the protestors would like, the money to pay up has to come from their budget. And ultimately, that could lead to less cash for expansions, hiring, and more.

Lawmakers in Washington, D.C. have been rigorously debating higher taxes on top corporate earners. But Monday, the proposal to hike such taxes under the "Buffett Rule" was voted down in the Senate.